Energy companies in SC shouldn’t get a blank check
When you are ordering something online or buying a car, your decision is based on the product and cost. Common sense, right?
We consumers don’t agree to purchase something and then give the vendor permission to raise the price on the product, a price that we will pay upon delivery. That would be giving the vendor a blank check.
But that is exactly what our state government is giving Dominion Energy and Santee Cooper: a blank check to build a big gas plant to produce electricity at the retired Canadys coal plant in Colleton County.
A blank check that every ratepayer in the service areas of these utilities will pay.
The state Legislature gave the green light to building this gas plant in May of last year when lawmakers were assured by the utilities that the total construction cost would be about $2.5 billion.
These costs would be shared equally by Dominion and Santee Cooper customers.
Then just seven months later, before construction had even started, Santee Cooper said the cost to build this plant had doubled to $5 billion, blaming increased demand on gas turbines and labor shortages.
Because the Legislature did not put a limit on the final construction costs, there is nothing absent PSC action to stop even more increases for the six-year construction project. The cost could go up to $10 billion, $15 billon, $20 billion or more.
Ratepayers will be on the hook for every penny.
We’ve seen this movie before.
In April 2007, the Legislature passed a bill to make it easier for the now defunct SCE&G and Santee Cooper to build two nuclear reactors. The seven-year construction project began in 2012 and was to cost $9.8 billion.The S.C. Public Service Commission was required by law to approve SCE&G rate hikes just to pay for the interest on the construction costs.
By 2016, the PSC had approved this nuclear energy project to go several billion dollars over budget, years behind schedule and eight rate hikes on SCE&G customers for a total rate increase of 17 percent.
That is why in July 2016, a new consumer coalition was formed, Stop the Blank Check, to raise the voice of consumer groups calling for action to protect at least the SCE&G ratepayers. Founding members were the S.C. Small Business Chamber of Commerce, the League of Women Voters of South Carolina, the S.C. Sierra Club and other non-profit organizations.
This effort was a success.
In November 2016, the PSC approved a settlement agreement between SCE&G and concerned parties. The settlement raised rates again by about 3 percent and permitted the utility to increase the budget by another $500 million to finish the project. But it also said any additional construction cost overruns would be the responsibility of the SCE&G shareholders, not ratepayers. With the blank check ended, SCE&G and Santee Cooper abandoned the project in July 2017.
Dominion Energy then bought SCE&G, leaving its ratepayers with a $2.3 billion nuclear debt to pay. Santee Cooper customers were stuck with a $4.5 billion debt.
Ratepayers of both utilities are still paying off those debts today.
To stop a blank check for the new gas plant, there are two paths forward.
First, the Legislature could tell the utilities that the ratepayers will only be responsible for $5 billion in construction costs.
Second, the PSC will hold a hearing next month to certify that the plant will comply with environmental matters and that the project is a public necessity. In its ruling, the PSC should state that the cost of the project to ratepayers will be no more than $5 billion, just as the utilities flatly stated in their application.
Additionally, the PSC should ensure that residential and small business customers are not subsidizing large load users when allocating the $5 billion cost.
No more blank checks for utilities.
~Frank Knapp Jr. is the president and CEO of the S.C. Small Business Chamber of Commerce. Lynn S. Teague is the vice president for issues and action of the League of Women Voters of South Carolina.
